Taxation of foreign investors and contractors basics, case studies and sugges...
Piaggio
1. Companies10March 28-April 3, 2016
By Thanh Xuan
Piaggio Vietnam Co. Ltd will
have to pay tax arrears for the
period 2008-2015, following
last week’s announcement by
the Ministry of Finance re-
voking tax incentives for the
importation of motorcycles.
The Ministry’s (MoF) de-
cision to repeal the corporate
income tax (CIT) incentives
which Piaggio Vietnam had
been granted in 2008 came
after last year’s conclusion by
MoF inspectors that the in-
vestment license issued by
the Industrial Parks Manag-
ing Board of Vinh Phuc
province was inconsistent
with the country’s taxation
policy.
The licence terms ex-
empted Piaggio Vietnam
from paying CIT on their im-
portation of motorcycles for
as long as two years after
reaching profitability. In addi-
tion, it granted them a 50 per
cent reduction for the next six
years, and a favourable tax
rate of 20 per cent for the fol-
lowing ten year period.
After agreeing with its in-
spectors’ proposal, the MoF
announced that the Vinh Phuc
department of taxation is
working with the local Peo-
ple’s Committee to come up
with an amended licence.
“The revocation is neces-
sary to ensure consistency in
our tax policies, which aim to
encourage manufacturing in-
vestment projects, not trading
activities (importation),” said
Deputy Minister Do Hoang
Anh Tuan.
Unfortunately for Piaggio
Vietnam, its production struc-
ture is a combination of man-
ufacturing and importing.
Tuan admitted that many
companies recently found
themselves in the same situa-
tion as Piaggio as provincial
authorities’ licensing was be-
yond their authority.
“However, these firms
have expressed their co-oper-
ative attitude towards the pol-
icy changes,” he said.
The motorcycle producer
requested that a new policy
be applied from 2016 on-
wards, and not be applied
retroactively. In addition to
saving them from being
slapped with a hefty tax bill,
this would help them simplify
the series of amendments
necessary to make on ac-
counting records and finan-
cial reports.
However, this request was
nipped in the bud by Tuan.
“Policies need to be consis-
tently implemented, or it will
create discrimination
amongst firms,” he said, im-
plying that Piaggio Vietnam
will have to pay the CIT tax
arrears for the past number of
years.
The value of Piaggio Viet-
nam’s tax arrears remains un-
known.
Companies that find
themselves facing such unex-
pected tax arrears bills argue
that the government should
bear liability for the mistakes
made by the local authorities
on its behalf – in this case the
Industrial Parks Managing
Board of Vinh Phuc province.
To date, such companies have
yet to receive any formal
apology.
If such companies are
looking for a silver lining in
this cloud, they may find it in
Tuan’s recent statement re-
garding their plight: “We un-
derstand that there are force
majeure factors at play here,
so we will not ask for late-
payment penalties”.n
Piaggio baulk at tax break u-turn
Piaggio will have to pay tax arrears following the MoF’s decision to repeal incentives Photo: Le Toan